WILLMAR -- Last year, when the price of anhydrous ammonia soared to more than $1,000 a ton, crop farmers staggered under the high price of the popular nitrogen fertilizer.

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This year the cost is about half that, but because anhydrous ammonia is made from natural gas, the price will likely continue to be volatile and create instability for agricultural input costs.

That is why the Kandiyohi County and City of Willmar Economic Development Commission is exploring the possibility of establishing a cooperative that would use new technology and ag-based renewable energy to produce anhydrous ammonia locally, where the renewable energy resources are available and where the end product could be used.

The EDC is using grant money to study the feasibility of using biomass gasification or wind power -- or a combination of the two -- to produce hydrogen that would be converted to anhydrous ammonia that could be used as nitrogen fertilizer on local farm fields.

A formal community presentation on the proposal is expected in December. The county's farmers, who could benefit financially from locally produced ammonia, will be invited to the forum.

"This will help save the farmers of Kandiyohi County so much money," said Kathy Keuseman, agribusiness and renewable energy coordinator for the EDC.

On Wednesday community leaders heard about a pilot project under way in Morris to use wind energy and water to produce hydrogen and ammonia, which is the first and only one of its kind in the world, according to Mike Reese, director of renewable energy at the University of Minnesota's West Central Research and Outreach Center.

Reese said producing anhydrous ammonia without natural gas would be a "nice hedge" against high anhydrous ammonia prices in the future and would be a way to keep renewable energy in rural America.

The technology for the processing is sound, Reese said, but there are currently economic glitches for moving it into the commercial market, in part because of the expense of using wind energy as a renewable source of electricity and because of the volatility of the price of natural gas-based nitrogen.

To have a successful commercial market, Reese said there needs to be favorable policies for using renewable hydrogen and ammonia, much like the mandates for using ethanol, and long-term farmer contracts for purchasing the product.

Cecil Massie, a consultant working on the Morris pilot project who's also working with the EDC on its proposal, said it makes sense to pursue renewable sources of ammonia.

"Successful energy projects are based on local resources supplying a local need, and this is a way to do this," he said.

Minnesota farmers plant 7½ million acres to corn each year and apply about 200 pounds of ammonia on each acre at a statewide cost of about $600 million, Massie said.

Because an increasing amount of ammonia comes from parts of the world that are "hostile to us, politically unstable or the supply route is threatened," Minnesota's corn crop is "dependent on a resource that's even less protected than our oil supply," Massie said.

Producing ammonia locally would improve the "security of the supply" and keep that $600 million in the state, he said.

Managing the financial risk of crop input costs will "dramatically stabilize" the way farmers operate their business, Massie said.

Steve Renquist, executive director of the EDC, said "due diligence" is being done to explore potential opportunities to bring the proposal to a commercial level. He said at this point there appears to be "good reasons to move to commercialization."